Correlation Between European Equity and XAI Octagon
Can any of the company-specific risk be diversified away by investing in both European Equity and XAI Octagon at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining European Equity and XAI Octagon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between European Equity Closed and XAI Octagon Floating, you can compare the effects of market volatilities on European Equity and XAI Octagon and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in European Equity with a short position of XAI Octagon. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Equity and XAI Octagon.
Diversification Opportunities for European Equity and XAI Octagon
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between European and XAI is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding European Equity Closed and XAI Octagon Floating in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XAI Octagon Floating and European Equity is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on European Equity Closed are associated (or correlated) with XAI Octagon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XAI Octagon Floating has no effect on the direction of European Equity i.e., European Equity and XAI Octagon go up and down completely randomly.
Pair Corralation between European Equity and XAI Octagon
Considering the 90-day investment horizon European Equity is expected to generate 1.26 times less return on investment than XAI Octagon. But when comparing it to its historical volatility, European Equity Closed is 1.24 times less risky than XAI Octagon. It trades about 0.03 of its potential returns per unit of risk. XAI Octagon Floating is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,204 in XAI Octagon Floating on August 24, 2024 and sell it today you would earn a total of 305.00 from holding XAI Octagon Floating or generate 13.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.4% |
| Values | Daily Returns |
European Equity Closed vs. XAI Octagon Floating
Performance |
| Timeline |
| European Equity Closed |
| XAI Octagon Floating |
European Equity and XAI Octagon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Equity and XAI Octagon
The main advantage of trading using opposite European Equity and XAI Octagon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Equity position performs unexpectedly, XAI Octagon can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in XAI Octagon will offset losses from the drop in XAI Octagon's long position.| European Equity vs. XAI Octagon Floating | European Equity vs. MFS Charter Income | European Equity vs. Nuveen New York | European Equity vs. Invesco High Income |
| XAI Octagon vs. Eagle Point Credit | XAI Octagon vs. Oxford Lane Capital | XAI Octagon vs. Priorityome Fund |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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